The Consequences of Defaulting a Merchant Cash Advance

By Robert Jacovetti

Many business owners struggling to pay off debt use merchant cash advances to fill in the gaps and avoid losing their business. However, merchant cash advances (MCA) can quickly snowball into another major issue – leaving businesses in an even more dire situation. If you are dealing with merchant cash advance issues, you might be looking into defaulting. Our team at Jacovetti Law, P.C. explains the consequences of defaulting a merchant cash advance and your other options.

If you are dealing with merchant cash advance debt, contact our New York debt relief attorneys today at (516) 217-4488 to schedule a consultation!

Defaulting Merchant Cash Advances

Defaulting is failing to pay a loan according to the terms agreed to in the promissory note. Failing to pay your merchant cash advance can lead to severe consequences. Because small business owners are often required to sign Confession of Judgment and personal guarantee in MCA agreements, your business could be in jeopardy if you default payments.

Since merchant cash advances are not considered loans, they are not governed by laws that apply to other business loans. If you fail to make MCA payments, it could be considered a breach of contract. This means that the merchant cash advance lender could file a lawsuit against your business and include the clause of Confession of Judgment.

What Is a Confession of Judgment?

A confession of judgment is an agreement between the merchant cash advance company and the borrower. In a confession of judgment, the borrower accepts liability for the merchant cash advance and waives all legal defenses if conditions of the agreement are breached. This allows the merchant cash advance company to go after your business in legal proceedings to recover funds you failed to pay – and ultimately seize your business assets.

If you are unable to make MCA payments, you need to seek legal guidance to ensure the protection of your business. Since you waived your legal rights in a confession of judgment, the MCA company doesn’t need to present evidence to the court to obtain a judgment. The MCA company can take legal action without notifying you – so you would find out when it’s too late. Once the confession of judgment is filed to the court, the MCA provider can begin levying business accounts and seizing your business. For such reasons, it is vital that you seek guidance from an experienced attorney as soon as possible to protect your business.

Although MCAs help fill the gaps when a company is dealing with cash flow problems, they can result in long-term issues that could severely impact a company. There are limited options when a company is facing MCA debt – for such reasons it is vital that business owners seek legal guidance to ensure that they are taking the necessary steps to protect themselves and their business.

How Can I Protect My Business?

If you were considering defaulting your MCA payments, you should look into other debt-relief options before it ends up costing you your business. Our team at Jacovetti Law, P.C. has extensive experience helping businesses deal with merchant cash advance problems. We can help you make arrangements with creditors and lenders to ensure that you make the necessary payments while also keeping your doors open. Let us guide you through the process and explain your options. Since time is of the essence, the sooner you contact us, the sooner we can begin protecting your business.

Contact our New York debt relief attorneys today at (516) 217-4488 to schedule a consultation!